LA County orders review of at least $60 million in leases implicated in bribery scandal, includes Pasadena building

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A woman passes the County of Los Angeles property on Telstar Avenue in El Monte on Thursday, May 24, 2018. LA County’s Board of Supervisors has ordered a review of leases negotiated by a former employee who admitted to bribery by Beverly Hills-based developer Arman Gabaee. The county currently leases seven buildings owned by Gabaee including the El Monte building. (Photo by Sarah Reingewirtz, Pasadena Star-News/SCNG)

Following revelations that an employee responsible for finding office space for several Los Angeles County departments accepted bribes, county officials are scrutinizing all leases the employee negotiated, including several in the San Gabriel Valley.

The Board of Supervisors ordered the review Tuesday. The number of leases subject to the review is unknown, but it will include at least four buildings in El Monte, one in Pasadena, one in Hawthorne and one in Los Angeles. Those seven buildings represent at least $60 million of county, state and federal spending over the lives of the leases.

The investigation

A criminal complaint filed against Gabaee earlier this month described an ongoing relationship with the unnamed county employee, who agreed to cooperate with the FBI in its case. Gabaee paid monthly $1,000 bribes over at least six years and offered to buy the employee a $1.1 million Santa Rosa property to secure the Hawthorne lease, the complaint alleged.

The employee admitted to accepting bribes from Gabaee and others to the FBI, according to the complaint. Attorneys for Gabaee could not be reached for comment.

The county employee — whose identity is confidential because of the investigation — resigned in lieu of termination in August. The board’s decision this week directed staff to review every lease negotiated by that employee, as well as every lease with Gabaee, within 90 days.

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“This incident was a serious betrayal of the public’s trust and will not be tolerated,” Supervisor Kathryn Barger, who co-sponsored the motion along with Supervisor Janice Hahn, said in a statement. “County taxpayers need strong assurances that our employees will be held to the highest ethical standards. Our CEO has conducted extensive reviews of leasing practices and has adopted stringent new policies, practices and safeguards.”

Through a spokeswoman, Hahn declined to comment.

The impacted properties

A county spokesman did not have a complete list of all the leases that will be reviewed, but he provided a list of leases the county currently has with Gabaee:

The District Attorney’s Office located in Buildings A & E at 3220 Rosemead Blvd., El Monte

The Department of Public Social Services suites at 3220 Rosemead Blvd., El Monte

The Department of Public Social Services building at 3216 Rosemead Blvd., El Monte

The Department of Public Health building at 9320 Telstar Ave., El Monte

The Department of Public Social Services building at 12000 Hawthorne Blvd., Hawthorne (the property at the center of the FBI investigation)

The Department of Mental Health building at 3303 N. Broadway, Los Angeles

The Department of Family and Children Services building at 532 E. Colorado Blvd., Floors 2-8, Pasadena

Overall, the seven leases represent more than 500,000 square feet of office space worth at least $60 million throughout the terms of the leases.

Gabaee’s use of LLCs

Although three of the county leases listed a company bearing his name, M&A Gabaee, the other four agreements listed three limited liability companies associated with him: Town Investment, LLC; KW Telstar, LLC; and Oppidan, LLC.

According to public business filings, Gabaee is associated with at least 13 other registered companies, nine of which are limited liability companies, known for their tax advantages and their ability to shield property owners’ identities.

In one recorded meeting with the county employee, which was cited in the complaint, Gabaee said the Santa Rosa property purchase “has to be in some kind of an LLC” and that he and the employee could “have nothing to do with it.”

The FBI special agent investigating Gabaee said in an affidavit he believed Gabaee “wanted to purchase the property through a limited liability company, or ‘LLC,’ in order to disguise his ownership interest and the fact that he was purchasing the property as a bribe.”

How the county will move forward

In their motion calling for the review, Barger and Hahn wrote that staff should prepare options for:

Re-evaluating the fair market value of the leases

Renegotiating the leases

Pursuing contractual and legal remedies available to the county

If necessary, establishing an ongoing protocol to ensure the recommendations from the most recent audit of county leasing are implemented

A county spokeswoman said that in addition to these measures, all employees in the county’s real estate division have undergone ethics training since the department became aware of the former employee’s actions. Lennie LaGuire also said a new management team will “strengthen oversight” of transactions, and a special strike team was established to provide more checks and balances in the division.

L.A. County CEO Sachi A. Hamai and her staff are “deeply troubled” by the alleged crimes and is pursuing an internal investigation of the matter, she said in a statement.

“While we cannot comment on the specifics of this pending case, we can say emphatically that we expect our employees to adhere to the highest standards of ethical behavior as they conduct the public’s business,” Hamai said. “Anything less is a betrayal of the public trust and will not be tolerated.”

Hayley Munguia covers Long Beach City Hall for the Southern California News Group. She previously worked as a data reporter for FiveThirtyEight and has written for The Week, the Jerusalem Post and the Austin American-Statesman, among other publications. She's originally from Austin, graduated from NYU and will pet a dog any chance she gets.